House bill aims to combat RIN fraud in RFS biodiesel program

Four US House Energy and Commerce Committee members—Republicans Pete Olson (Tex.) and Marsha Blackburn (Tenn.) and Democrats Gene Green (Tex.) and Jim Matheson (Utah)—introduced a bill designed to eliminate fraud in the federal Renewable Fuel Standard’s biodiesel program.

The bipartisan measure, the Stop RIN Fraud Act of 2012, would require the US Environmental Protection Agency to certify that Renewable Identification Numbers (RIN), which refiners and blenders can trade to help them meet their biodiesel production quotas, are valid before they can go on the market.

Under the current system, these “obligated parties” who unknowingly submit RIN that are later found to be fraudulent can be fined even if they have taken steps to avoid buying the fake credits. EPA requires a third-party engineering review before a biofuel producer can generate RIN in the agency’s Moderated Transaction System, but provides no way to follow up and determine that a plant is actually producing them, the sponsors said on Sept. 20.

They noted that just three biodiesel companies generated more than 140 million fake RIN—about 5-12% of the current biodiesel market for the credits—and EPA is investigating other possibly illicit producers while continuing to hold purchasers of the bogus RIN responsible.

“This is a problem EPA could have, and should have, resolved by now,” API Pres. Jack N. Gerard said. “The current system is unworkable, and could potentially undermine the entire [RFS]. EPA’s failure to act quickly could raise the cost of making fuels in the United States, and it’s time for Congress to provide a solution.”

In a letter to the measure’s cosponsors, AFPM Pres. Charles T. Drevna said it contained a commonsense approach that would protect the innocent victims of RIN fraud and help restore confidence in the renewable fuels market.

“The ‘Stop RIN Fraud Act’ would force EPA to establish a process for certifying RINs that would be valid for purposes of complying with the RFS,” Drevna continued. “This logical solution would not absolve the industry of its responsibility to exercise due diligence or place unwarranted burdens on EPA, but would finally provide a fair solution.”